August 11, 2005

Colorado highway “slowdown” sparks debate on toll roads

SAN FRANCISCO (Reuters) - A stretch of country highway near
Denver has become an unlikely rallying point for opponents of
the privatization and tolling of roads.

The highway, known as Tower Road, was inexplicably slowed
several years ago to 40 miles per hour from 55, and traffic
lights appeared at three intersections.

The move had locals in the town of Commerce City, Colorado,
population 35,000, scratching their heads. Just as a new toll
road had opened up near the town, their lightly traveled local
thoroughfare got a lot slower.

Newly disclosed documents show that, as part of a
non-compete agreement with the toll road authority 10 years
ago, officials from the town of Commerce City agreed to
intentionally slow down the road -- now much busier with hotels
and office buildings -- to discourage drivers from skipping out
on paying to use the toll highway.

"They didn't want to have Tower Road be a competitive
thoroughfare," said Robert Gehler, the Commerce City attorney,
who was a part of the negotiations.

The disclosure of the Tower Road slowdown -- discovered by
an inquisitive Colorado resident who posted it on the blog
http://www.unbossed.com -- shines a light on the touchy issue
of non-compete agreements, which are a common component of toll
roads.

The issue is likely to become even more pressing now that
President George W. Bush has signed the federal highway bill,
which includes a $15 billion bonding provision designed to
increase toll-road investment.

FREE MARKET OR FIXED MARKET?

The nation's fixation with highway travel began in the
1790s with Pennsylvania's stone and gravel Lancaster Turnpike,
the first major toll road, that cost about $2.25 to travel its
entire 62 miles from Philadelphia to Lancaster.

Proponents of tolled roads, which can be operated by
private companies, partnerships of government and business, or
by governments alone, say that in congested urban areas tolls
ensure that a scarce resource is allotted fairly.

They also say that toll roads are the future of the U.S.
road system, at least for the foreseeable future, since budgets
for new highway projects are far tighter. Today, 23 states
permit private participation in road building, and five of six
major private projects include non-compete clauses to ensure
viability of the roads.

Opponents, however, say non-compete agreements, or at least
some of their terms, violate free-market principles.

"They're putting a thumb on the scale," said Ellen Dannin,
a law professor at Wayne State University who studies
privatization.

Non-competes, she said, highlight the difficulty that many
toll-road agencies are having meeting revenue targets.

In Southern California, where road congestion is a way of
life, the state's first experiment with private toll roads
ended in controversy when private owners of express lanes
successfully fought an effort by officials to expand the
parallel free lanes of a state highway.

Commuters, outraged that a non-compete agreement with a
profit-seeking business prevented the highway expansion,
complained, leading to the sale of the road back to the
government.

Karen Hedlund, an authority on toll roads and a
Virginia-based partner at Nossaman, Guthner, Knox & Elliott
LLP, said non-competes serve a valuable purpose: they ensure
that investors in toll roads will not suddenly have to compete
with new highways after laying out billions of dollars up
front.

Nevertheless, the idea of intentionally slowing down a
public road is something, Hedlund said, that would never be
written into modern-day, non-compete agreements. "We're
involved in toll roads across the country, and I've never heard
of such a thing," Hedlund said.

SLOWER ROAD AHEAD

John Pommer, the chairman of the Colorado general
assembly's transportation and energy committee, said the idea
of paying for unnecessary traffic lights to convince drivers to
avoid a free road sounded unusual.

"Good grief," Pommer said, "That sounds like a pretty raw
deal." He plans to inquire about the Commerce City agreement
during a previously scheduled hearing on Thursday with
officials of the toll road, which is called E-470.

Completed in 2003, the E-470 beltway runs for 47 miles
along the eastern perimeter of the Denver area. It costs $8.50
to drive the length of the road, which is owned by a group of
local jurisdictions.

While technically public, the highway authority is run like
a business, with revenue targets and customer service closely
monitored, said Edward DeLozier, the executive director.

DeLozier said the Commerce City slowdown had been
negotiated by his predecessor. Today, he said, the road
competes on service, and does not view local roads as
competition.

If Commerce City wanted to raise the speed limit, he said,
he would take the matter to the authority's board.